Average Order Value

What is Average Order Value (AOV)?

Average order value is the average dollar amount a customer spends every time they place an order. 

It tracks the average basket size across all transactions over a specific timeframe.

 For example, if an online store generates $5,000 from 100 orders in a single week, their average order value's $50 per checkout.

Why should you track Average Order Value?

Tracking average order value shows you how effectively you monetize your existing traffic, so you don't have to rely solely on expensive ad campaigns to grow. 

When your order value increases, your business earns more revenue from the exact same number of customers. Raising this metric boosts your profit margins and helps offset high customer acquisition costs, so you can reinvest more cash into your growth strategies.

How do you calculate Average Order Value?

You calculate average order value by taking your total revenue over a set period and dividing it by the total number of orders placed during that same period.

The basic formula follows this format:

Total Revenue / Total Number of Orders = Average Order Value

For example, let's say your shop brings in $20,000 in gross revenue during a single month across 400 total orders. You divide 20,000 by 400, which leaves you with an average order value of $50.

To keep this number accurate, you should always make sure you pull both revenue and order totals from the exact same time window, and you should decide whether to include tax and shipping fees in your total revenue consistently.